Advisors need to start charging appropriately for different service offerings, argues portfolio manager
How do your clients assign value to your different service offerings? Assuming you are operating a multi-service platform and provide deliverables beyond portfolio management, how much of the fee that you charge to clients is for each deliverable?
Likely the biggest buzz phrase in the financial services industry over the past 10-15 years has been, “I provide comprehensive wealth management”. But what does that actually mean and more importantly, what do your clients think it means?
At this point, I think it is safe to say that the agreed upon definition of wealth management means that an advisor provides a multi-service offering to clients, which typically includes traditional portfolio management accompanied with financial, tax and estate-planning services, with auxiliary advice on other areas provided.
Essentially, it means providing a cohesive financial advice ecosystem for all of your clients’ financial needs. Given how difficult it is for industry players to confidently define what wealth management is, I think it is fair to say that most clients could not answer the question confidently either.
Herein lies a problem for true wealth advisors because clients do not place value in the services they are providing. This is a dangerous situation to be in and one that we must correct immediately if we are to take our place as trusted professionals.
This is particularly worrisome to me because I truly believe that the advice related to areas beyond portfolio structure are more important to ensuring the success of our clients in achieving their goals for their family and their lifestyle. But how do we remedy this and reposition our services in our client’s mind?
It starts with intentional conversation. How much time are you spending in your review meetings talking about investment portfolios as compared to advice related to other financial needs? Which items are you prioritizing first in your meeting agenda? In review meetings I like to ensure that I am in control of the conversation and directing things. This does not mean that I ignore what the client wants to talk about; quite the opposite, as I tailor my meeting agenda to each client and ensure I am hitting their hot-button items first.
This means I am allocating a proportionate amount of time to the areas that can add the most value, which often relates to financial planning, including tax and estate advice.
Another challenge in increasing the perceived value of planning relates to client comprehension of the offering. Since clients do not understand other advice offerings, it’s hard for them to place a dollar value on what they are worth. Investment returns are easy to understand as it ties directly back to dollars and cents. We need to ensure that we are communicating the value of additional advice offerings to clients in terms they can understand.
I also believe there is value in adding a tangible experience to planning through an interactive process. In an Apple Store, all the MacBook’s are displayed open, with the screen at a 90-degree angle. Not because this is the angle which people are comfortable using but because it forces you to touch the device to move it to a comfortable angle for use. Apple wants you to feel the device. We can do something similar in financial planning by creating an interactive experience where the client gets to make changes with your guidance. Force the client to touch the plan and it will become more real in their mind. For the record, I am not talking about them flipping pages in a binder here.
Ultimately, this also comes down to how we charge. I believe there is a flaw in the industry currently in that revenues streams are largely tied to the investment portfolio. Because of this, clients believe they pay for investment advice and they get everything else for free. Technically they do. Giving wealth management advice away for free means that clients will never assign it the value it deserves.
We do not need to increase client fees necessarily, but we do need to start charging appropriately for the services we are truly providing. This will also help to separate your service offering from other advisors who would rather focus on a specialized practice.
Being recognized as trusted professionals should be a major industry goal going forward. It starts with evaluating where our clients see value in us and ensuring they know the difference.
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager/Investment Advisor for Industrial Alliance Securities Inc. Opinions expressed in this article are those of the Portfolio Manager/Investment Advisor only and do not necessarily reflect those of Industrial Alliance Securities Inc. Industrial Alliance Securities Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.